How does UPI on credit card work with secured (FD-backed) cards?

The UPI feature for credit cards enables consumers to use their available credit to make UPI payments instead of using their bank account balance. This service works in the same manner for secured or FD-backed (Fixed Deposit) credit cards, but there are some distinctions regarding risk and how repayment will be performed. A secured credit card is a type of credit card that has been secured with a specific amount of money to be held in either a bank or an FD, which reduces the risk to the bank if the cardholder defaults on their payment obligation.

When you apply a UPI payment to a secured credit card, it processes the payment as a credit payment instead of being directly withdrawn from your savings account. Therefore, your fixed deposit is not being used but remains untouched unless you do not repay your outstanding credit card bill. Many individuals mistakenly assume that any amount paid via UPI from a secured credit card goes against their FD balance; however, that is not the case. The FD will not be utilised unless the consumer fails to repay their credit card obligations.

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Using a secure credit card for UPI payments is similar to using a regular credit card. After choosing your credit card in the supported UPI app, you authenticate the transaction using your UPI PIN; thus, the amount is charged to your card. The merchant receives the payment, and the transaction appears on your credit card statement.

When it comes to repayment, secured credit cards follow the same principles as standard credit cards. At the end of the billing cycle, your credit card company sends you a statement listing all transactions, along with a due date for a full payment of the balance to avoid potential interest charges. Failure to pay the full balance on the due date may incur interest, and continued failure to pay may lead to your secured credit card provider obtaining the owed funds from your fixed deposit account.

Also Read: Can Students Get a ₹2,000 FD Credit Card? A Complete Guide

Using a secured credit card with UPI has the added benefit of accessibility for those who are new to credit or who have limited credit history, as an FD-backed card may be the first step in establishing one's credit history. The addition of UPI functionality adds more convenience for consumers using a secure credit card to make everyday digital payments while also helping them to gain a repayment record, which positively contributes to their overall credit profile when managed properly.

Also Read: ₹2,000 FD Credit Card Limit: How Much Limit Can You Get?

Caution is advised for all users, as the Fixed Deposit (FD) can create a false sense of security, causing some to underestimate the significance of making timely payments. Non-payment could incur penalties and/or interest charges and/or may result in either partial or total cancellation of your FD, which eliminates the advantages of establishing your financial credibility and enhancing your credit score.

Additionally, it should be mentioned that there are limits to the UPI capabilities associated with secured credit cards, which are contingent upon the issuing bank and the card network. Certain secured credit cards only allow UPI payments when purchasing from a merchant and may not provide as much versatility with respect to using them for UPI payments. The amount you can spend with the UPI feature on these cards may also be subject to limits.

Also Read: How to Get a Credit Card with Just a ₹2,000 FD in India

With regard to security, all UPI transactions are protected by an authentication process and the card issuer's fraud prevention services. Nevertheless, users should ensure that they never disclose their personal identification number (PIN) and monitor all transaction activity regularly.

The importance of transparency and ease of understanding when dealing with credit products cannot be understated, as ZETAPP is a service, among others, that is designed to simplify how people communicate and engage with credit products, making it easy to keep track of the usage, repayment habits and financial responsibilities.

FAQs

Does UPI payment on a secured credit card deduct money from my fixed deposit?

No, the amount will be debited from your Credit Card Limit, but the Fixed Deposit account will remain untouched until the time when you default on your payments.

Can using UPI on a secured credit card help build my credit score?

Yes, making timely payments will reflect positively on your credit history, similar to using a credit card.

Are there spending limits on UPI payments with FD-backed cards?

Yes. There are limits based on your Credit Card Limit, bank policies, and UPI regulations.

What happens if I do not repay my UPI credit card dues on time?

You will incur interest as well as a late payment fee. If you continue to be delinquent in paying your dues, the bank can collect the amount from your fixed deposit account.